February 18th, 2009
New $8,000 Credit for 1st Time Homebuyers
We just discussed the $7,500 credit in the previous post, but yesterday President Obama signed the $787 billion stimulus bill that includes a new $8,000 first time homebuyer tax credit. This tax credit is similar to the previous plan in that it hopes to stabilize home prices, but the incentives have changed considerably.
The biggest change is that the $8,000 credit is NOT an interest free loan and is now refundable. Previously, you were required to payback the $7,500 tax credit over 15 years. Now, you will receive a one-time credit of $8,000 that you will not have to payback. If you are owed a refund, this amount will be added to your refund amount. This is not the case with the $7,500 tax credit.
Many of the requirements are the same as previously stated; the house must be a owner occupied, you cannot have purchased a home in the last 3 years, and the income maximum of $75,000 (single) and $150,000 (jointly) still apply. If you make over that amount, you may still be eligible for the credit, but at a reduced rate. If you make more than $95,000 or $170,000 on a joint return, you are not eligible at all. What has changed is the timeframe in which you must purchase your home. The previous tax credit was good for houses purchased from April 9, 2008 to July 1, 2009. This new tax credit is only good for homes purchased from January 1, 2009 to December 1, 2009. Additionally, you will have to retain the home for at least 3 years. If you do not, you will have to return the credit to the government.
This new tax credit is significantly more consumer-friendly and many people are upset that this tax credit has not been made retroactive to cover those in the $7,500 tax credit bracket. So if you bought your home from April 9, 2008 to December 31, 2008, you are currently stuck with the $7,500 tax credit, but if you purchased on or after January 1, 2009, this new tax credit will essentially put an extra $8,000 into your pocket. Overall, this credit is overwhelmingly more beneficial than the initial $7,500 credit.
With this new $8,000 credit in place, a large available inventory of homes for sale, as well as historically low mortgage rates, this should push those who were considering buying a home into action. As more programs are put into place to help out potential home-buyers, we will review them as they become available to provide information to our readers.
Related posts:
- $7,500 Tax Credit for 1st Time Homebuyers As part of Housing and Economic Recovery Act that was signed into law in July, a $7,500 tax credit was...
- Is It Time to Refinance? If you are homeowner, you have no doubt been watching home prices and the subprime mortgage driven collapse of the...
- $8,000 First-Time Homebuyer Tax Credit Deadline Nears Uncle Sam’s $8,000 Tax Credit for first-time homebuyers is fast approaching its December 1, 2009 deadline, and with less than...
- Why It’s a Great Time To Rent Rather Than Buy A Home Owning a home is still the American dream, but in today’s unpredictable economic climate, it’s becoming more advantageous to rent...
- Mortgage Rates Are At An All-Time Low… But Is Anyone Buying? Mortgage rates fell to its lowest levels this year to 4.72% for a 30-year fixed mortgage, but are there any...
Change or slip? You state to be eligible, the person must not have bought (rather than owned) a home for three years.
Okay–I’m confused. You state that this is a “first time home buyer $8,000 tax credit” but go on to state that “you must not have purchased a home in the last three years”. In my mind–if you’ve purchased a home at all then you wouldn’t qualify as a first time buyer. Clarification please?
The way the credit was written, there is a loophole that will allow you to still qualify as long as you haven’t bought or maintained a home in the last three years. So if you bought a home 10 years ago, sold it 5 years later, and didn’t buy a new property, you would still be seen as a “1st time homebuyer”.
$7500 vs $8000, what’s the big deal? it sure isn’t clear from this article.
The difference is the $7,500 credit is not really a credit, it is an interest free loan that you pay back over 15 years.
The $8,000 credit is applied toward your taxable income at the end of the year and will reduce your taxable income.
One is a interest free loan, the other is a tax credit.